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Friday, 30 Jul 2010

EUR/USD Still Hovering Around 3-Month High

After hitting a three month high against the U.S. dollar in trading yesterday, the euro took some slight losses last night, falling some 30 pips against the greenback. The overall trend for EUR/USD is still up, especially ahead of the U.S. Advance GDP figure, which is forecasted to show a slight decrease from the previous report.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupdowndownupup
Weekly Trendupupdowndownupno
Resistance1.31591.570287.311.04890.89900.8428
1.31261.567186.971.04560.89900.8406
1.30951.564086.651.04250.90200.8385
Support1.30321.557986.021.03620.89590.8342
1.29941.555085.691.03300.89280.8319
1.29611.552885.381.02970.88920.8296

Economic News

USD - Dollar Manages Slight Gains, But Remains Low Overall

A less than encouraging Unemployment Claims report released yesterday did little to assuage investor fears in the pace of the U.S. economic recovery. Following the report's release, the dollar not only hit a 3-month low against the euro, but also recorded further losses against both the yen and Swiss franc. EUR/USD has since experienced a slight correction, but still remains dangerously close to reaching new highs. Currently the pair is trading around the 1.3060 level, down from 1.3080 early last night.

USD/JPY fell fairly consistently throughout yesterday and into overnight trading. Confidence in the greenback as a safe haven currency is clearly in question, and the yen appears to be the one currency investors are turning to. USD/JPY has fallen over 80 pips in the last 24 hours, and with no positive U.S. news forecasted, the dollar's bearish trend is likely to persist.

Today, traders will want to pay close attention to the U.S. Advance GDP report, set to be released at 12:30 GMT. Analysts are forecasting a decrease in the GDP figure from last quarter, which if true, will likely cause investors to continue to sell the dollar. Should the GDP come in at or below the forecasted 2.5%, expect further dollar losses against the yen, euro and possibly British pound.

EUR - EUR Records Gains on USD, Losses Against JPY and CHF

While the euro has reached a 12-week high versus the U.S. dollar, is has tumbled against some of its other main currency rivals over the last 24 hours. Recent news out of the E.U., has given investors the impression that the economic recovery in Europe is moving faster than in the United States.

EUR/USD subsequently reached above 1.3100 in trading yesterday. At the same time, EUR/JPY fell some 75 pips in overnight trading. EUR/CHF fell over 100 pips in the same period of time. It appears that with the exception of the dollar, risk aversion is still present in the marketplace.

Today, euro traders will want to keep an eye on the E.U. unemployment figure, set to be released at 09:00 GMT. While analysts are forecasting European unemployment to remain the same from last month, the slightest change could create volatility in the marketplace. A figure below 10% may generate some risk taking, and could lead to gains for the single currency. In addition, traders will want to watch out for the U.S. Advance GDP report. Should there be a drop in the U.S. GDP, expect EUR/USD to make an even starker jump than yesterday.

JPY - Safe Haven Yen Climbs Vs. Rivals

The Japanese yen has continued to make gains against its main currency rivals, as risk aversion continues do be the predominant market sentiment. USD/JPY fell some 40 pips in overnight trading and currently stands close to the 86.50 mark. GBP/JPY fell some 80 pips in the same amount of time, with the pair currently trading around the 135.00 level.

Analysts attribute the continuous yen gains to the overall slow pace of the global economic recovery, combined with positive Japanese economic indicators. Last night's household spending report came in much better than expected, and generated solid momentum for the yen.

Today, traders will want to pay attention to not only the U.S. Advance GDP figure, but also the European unemployment number as well as Swiss KOF Economic Barometer. With most of these indicators forecasted to show little if any improvement in their respective economies, the yen should have no trouble extending its gains. That being said, should any of the news come in better than predicted, JPY may take some midday losses.

OIL - Crude Oil Jumps in Overnight Trading

The price of crude spiked in overnight trading, moving up some 165 pips as investors eagerly await the impending U.S. Advance GDP report. Analysts attribute the increase in oil prices, to the overall weak dollar, which makes purchasing the commodity more attractive to international investors. Currently, crude oil is trading around the 78.10 level.

With the U.S. GDP report today expected to show a drop from last month, crude prices will likely continue to rise should the dollar sink lower. At the same time, should the GP report signal any gains in the U.S. economy, crude prices may fall in afternoon trading.

Technical News

EUR/USD

The pair continues to move higher and broke above the 1.3100 level but stopped short of 1.3120 which coincides with the 38.2% Fibonacci retracement from the previous bearish trend that began in December of 2009. Should the pair move above the 38.2% retracement, the next major Fibonacci level of 50% rests in line with the resistance level at 1.3500. Short term resistance comes in at 1.3240.

GBP/USD

Quiet trading had the pair in a tight range and ended in a doji candlestick formation as the pair rose to a new high at 1.5561 before falling back to the support level at 1.5575. Momentum appears to be behind the pair as the Momentum (7) indicator reached a new high yesterday, in step with the new high for the bullish trend. The next resistance levels rest at 1.5725 followed by 1.5820.

USD/JPY

Yesterday the pair broke out of the bearish flag pattern on the 4-hour chart, falling below the lower line in sync with the long term trend of the pair. The breach of the lower line took the pair as low as the 86.25 support level where the price failed to go lower. A breach below the support level could take the pair to the next support on the weekly chart at 85.85, followed by 85.30.

USD/CHF

The USD/CHF cross has been experiencing bearish behavior in the past 2 days. However, there is technical data that supports a bullish move for today. The RSI on the 4-hour chart indicates that the pair floats in the oversold territory, leading to the conclusion that an upward correction is imminent. Going long with tight stops may pay off today.

The Wild Card

AUD/NZD

The AUD/NZD sustained upward movement and has finally pushed its price into the over-bought territory on the 8-hour chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Current Time: 07/24 03:59 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
07/24
07:00EUR+ Spanish Unemployment Rate25.9%--3
08:00EUR+ French Flash Manufacturing PMI48.2--5
08:00EUR+ French Flash Services PMI48.2--3
08:30EUR+ German Flash Manufacturing PMI52.0--5
08:30EUR+ German Flash Services PMI54.6--3
09:00EUR+ Flash Manufacturing PMI51.8--3
09:00EUR+ Flash Services PMI52.8--3
09:00EUR+ Italian Retail Salesm/m0.4%--1
09:30GBP+ Retail Sales m/m-0.5%--5
13:30USD+ Unemployment Claims 302K--5
14:45USD+ Flash Manufacturing PMI57.3--3
15:00USD+ New Home Sales504K--5
15:30USD+ Natural Gas Storage 107B--1
00:30JPY+ Tokyo Core CPI y/y2.8%--3
00:30JPY+ National Core CPI y/y3.4%--1
00:50JPY+ CSPIy/y3.6%--1
07/25
01:00EUR+ Spanish HPIq/q---3
02:00NZD+ ANZ Business Confidence42.8--5
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